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EU’s Barnier Said to Urge Rethink of U.S. Swaps Rules

EU financial services chief seeks changes in draft rules on swaps.

Michel Barnier, the European Union financial services chief, urged U.S. Treasury Secretary Jacob J. Lew to seek changes to draft rules on swaps and the treatment of EU bank units, saying they may undermine efforts to clinch a trade pact, said two people familiar with the talks.

Barnier told Lew that EU and U.S. moves to begin negotiations on a free-trade deal made revising the measures more urgent, according to the people who asked not to be cited by name because the discussions are private. Lew and Barnier, meeting in Brussels yesterday, agreed to further discussions on the measures, the people said.

The two agreed to “stay in close and regular contact and strengthen the U.S.-EU financial market and regulatory dialog,” according to a joint statement issued by their offices. Lew raised concerns at the meeting that plans by some EU nations to implement a common tax on financial transactions would lead to charges being imposed on U.S.-based companies, the people said.

The U.S. Commodity Futures Trading Commission is under pressure from regulators in the EU and Japan to overhaul planned rules for derivative trading on concerns that the measures may leave companies outside the U.S. facing overlapping requirements. Global regulators said last year that nations should resolve the clash as it risks hampering efforts by investors and clearinghouses to comply with international standards.

Lew and Barnier agreed both sides would keep working to ensure robust and convergent frameworks on derivatives and that prudential frameworks ensure financial institutions hold sufficient capital and are resolvable in an orderly manner, according to a Treasury official, who also asked not to be identified because the talks were private.

Barnier is also pushing back against proposals from the U.S. Federal Reserve that foreign lenders organize their U.S. units as subsidiaries and hold capital independently from their parent firms to make it easier for U.S. regulators to seize local assets in a crisis. The Fed is seeking views on the measures, which Barnier has warned could drive up costs for EU banks.

Lew met Barnier as part of a visit to Europe in which he saw European Union officials in Brussels and will meet central bankers in Frankfurt before heading to Berlin and Paris.

Chantal Hughes, a spokeswoman for Barnier, declined to comment on the details of today’s meeting beyond yesterday’s statement.

Bloomberg News

Bloomberg News

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